SATISH CHANDRA, J. - (1.) THE present appeal is filed by the assessee against the impugned order dated 16th September 2005 passed by the Income Tax Appellate Tribunal, Delhi in ITA No. 36942/Del/2004 for the assessment year 1998 -1999. The Tribunal has also dismissed the Misc. Application No. 265(Del.)06 vide its order dated 22nd Septembe2006. Being aggrieved, the assessee has filed the present appeal.
(2.) THE brief facts of the case are that during the assessment year under consideration, the assessee firm had a sugarcane crusher at Bilaspur, District Rampur. The assessee discontinued this business in the financial year 1992 -93 and filed an intimation before the competent authority pertaining to the closure of business. During the assessment year under consideration, the assessee did not file any return of income, so the proceedings were started under Sections 148/147 of the Act, and the assessee had filed a return of negative income, but the A.O. has found that the assessee had paid the interest amounting to Rs. 1,22,134/ - to various depositors from whom the assessee had borrowed the fund. As no business was done by the assessee, so the A.O. disallowed the said amount and made the addition. But the CIT(A) has deleted the said addition by observing that the funds were borrowed for the purpose of business and to settle the debts, money was paid to the creditors. However, the Tribunal has restored the order passed by A.O. and sustained the addition made by the A.O. for Rs. 1,22,134/ -.
(3.) SHRI Suyash Agrawal, the learned counsel for the assessee has justified the order passed by the First Appellate Authority. On the other hand, Shri R.K. Upadhyaya, the learned counsel for the Department has justified the impugned order passed by the Tribunal. We heard both the parties at length and gone through the materials available on record. From the record, it appears that the assessee had started the crushing business, which was closed in the financial year 1992 -93, and since then no business was done by the assessee, but the liability of the borrowed fund was continued. No interest was paid to the depositors up to the assessment year 1997 -98 and 1998 -99, but on a settlement between the depositors and firm, it was finally assessed that the interest is to be paid to them in the year under consideration. By virtue of the settlement, the assessee has to pay interest amount for only one year and for remaining period no interest was payable. In other words, the assessee has paid the interest only for the assessment year 1998 -99 and not for the remaining four years as per the settlement.;